In this section we continue our look at the external influences on social media. We have discussed a few examples of how politics and society influence social media. Here we cover the remaing three external influences: economics, competition, and technology.

The Role of the Economy

The industry's success has not appeared to be correlated to GDP over the past decade, but we can see there was a significant drop in the level of year to year change in revenues and employment after our recession. This implies that although the industry has only lived through one recession, it is not recession-proof. This makes sense as the social media industry's primary revenue stream comes from advertising. Since there was less spending on advertisements, there was a direct effect on the industry's revenues.

Additionally, the industry heavily depends on technically trained individuals, particularly in science, technology, engineering, and mathematics, (STEM) for employment. According to the US Department of Commerce, STEM occupations are projected to grow by 17% through 2018. The social media industry competes with other industries, including web solutions providers, government agencies, and even hardware developers, for employees with training and experience in the STEM fields. Pretty much any industry that has a large R&D investment requirement will need STEM trained employees.

Competitive Edges Are Sharp

The saturation level of existing companies is already high and it continues to grow. Barriers for new entrants are relatively low, but there are many challenges that can hinder success. In the Industry Assessment section, you can see a Porter's Five Forces analysis of the social media industry for an understanding of the risks and potential mitigations for those risks in deciding to enter the industry.

Existing players, especially the larger ones with high revenue streams are constantly investing in innovative upgrades to existing services and the introduction of new services. This is witnessed by the operations and acquisitions that were discussed in the Market Leaders section.

The biggest influence competition has on the industry is that it forces ceaseless evolution in order to ensure that demands are met for all stakeholders. It motivates new entrants to strive for visibility and success. The competition coerces differentiation and adaptation, which sometimes results in companies positioning themselves in ways that were not originally intended. Even though there appears to be a, sort of, "winner-takes-all" situation with current market leaders, particularly Facebook, this is still a growth industry with great opportunities.

Technology Creates Opportunities

Technology is the backbone upon which the growth and progress of the social media industry depends. There are three main factors surrounding technological advancement and its effect on the social media industry: cost, accessibility, and innovation. These factors apply to both the hardware and the software elements that the industry is built on and delivered through. Lower costs for desktop computers, mobile devices, and internet service allows more people access to SNS. Access is being provided to remote locations via innovative delivery methods, such as satellites or network signal repeaters. As internet accessibility provides the industry a broader audience, thanks to cheaper and more available technology, the industry has to adapt to the load by being scalable.

Technological innovation has an enormous influence on the industry. Mobile technology has proven to be a game-changer over the past 10 years. It has changed the way users connect to each other and how the industry earns its revenues. There is movement towards wearable technology, which can make new waves in the near future, especially if we consider the potential applications of augmented and virtual reality.

Furthermore, the introduction of the Internet of Things (IoT), which integrates internet connectivity into traditionally static objects, creates an entirely new world of life and communication. Will we exist in a world where a sensor in a potted plant can inform its watering device that the plant is "thirsty?" Might our roads be able to let our self-driving cars "know" where parking is available? The possibilities are truly endless and, if this becomes the case, the integration of all these smart objects into society might have to be accounted for by the social media industry. Read about our survey to find out how people feel about the usage of social media in conjunction with the internet enabled sensors of the IoT.